My Forex Blog

How does Forex Stack Up Against Futures

Are you thinking about getting into the wider world of forex, but you’re not sure if you should leave your current trading strategy? You’re actually in very good company. A lot of people are interesting in the world of forex but they have to make sure that you’re really making a good move by switching over. If you have something that already works, we’re definitely not telling you that you should only think about forex and forsake everything else. The nice part of investing is that you really can do just about anything and everything that you want already. If you want to dive into forex, you can definitely do that.

What if you’re already in the futures market? Surprisingly enough, you can stay there. You don’t have to cross futures off your list if you want to go with forex. But there are some advantages to be had when it comes to forex versus the futures market.

The first area would have to be liquidity, first and foremost. Indeed, the forex market is huge. How huge? $4 trillion is traded everyday. It’s the largest and most liquid market in the world. You can pretty much expect a lot of volume. However, you might think that the futures market is pretty massive. This isn’t quite the case — $30 billion is nothing like $4 trillion. That’s why the forex market is really getting a lot more attention than it had in the past. If you really want to make sure that you dive into a market that can really offer you the most volume for value, it would have to be forex, hands down.

Liquidity, if you’re not sure what we’re referring to, is simply the concept of positions being liquidity into cash and stop orders being executed quickly. Unless the market in question is extremely volatile, you can back out of positions quickly.

The futures market isn’t a 24 hour market, but the forex market sure is! You will be able to pretty much trade all day and all night if that’s what you really wanted. This is because the major markets open and close at different times. If you want to trade at a different time, you just switch to another marketplace. Sydney closed? Go to London! London closed? Hit New York! It’s really a 24 hour seamless market.

The difference in commissions is also staggering as well. Futures is an expensive market to trade in because the commissions are so high. It’s the cost of doing business, you say? It doesn’t have to be that way!

In the forex market, the commissions are much smaller, if they’re even charged at all. Yes, brokers are going to make their money in terms of the spread, but that’s with any marketplace. When you really compare futures with the forex market, there are just too many advantages not to really pay attention to them.

What about price certainty? You will virtually always know what the prices are in the forex market, at least when the market is under normal conditions. However, futures and equities don’t work nearly the same way. The price can be incredibly volatile, and the price that you’re quoted is often the last trade, not the price for the contract at fulfillment.

Even though forex can be risky, there are steps that traders can and will take in order to minimize their risk. You can set stop loss points so that you can gracefully back out if a trade goes to a place where you don’t want it to go. During normal market operations, your open positions are going to be closed fast.

Overall, we really can’t speak enough on the many benefits of going towards forex rather than futures. Are we saying that you have to get out of the futures market? Not at all. It’s completely up to you, as always!